Legislature(2015 - 2016)SENATE FINANCE 532
04/13/2016 05:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB254 | |
| HB314 | |
| SB206 | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 254 | TELECONFERENCED | |
| + | HB 314 | TELECONFERENCED | |
| + | SB 206 | TELECONFERENCED | |
| += | SB 130 | TELECONFERENCED | |
| += | HB 247 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 254
"An Act extending the termination date of the Big Game
Commercial Services Board; and providing for an
effective date."
5:10:31 PM
REPRESENTATIVE LOUISE STUTES, SPONSOR, explained that the
bill extended the sunset date of the Big Game Commercial
Service Board (BGCSB) from June 30, 2016 to June 30, 2019.
She turned to her staff to further detail the bill.
REID HARRIS, STAFF, REPRESENTATIVE LOUISE STUTES, read from
the prepared sponsor statement:
The BGCSB is staffed by the Division of Corporations,
Business and Professional Licensing. The BGCSB
consists of two licensed Registered Guide
two licensed Transporters, two private landholders,
two public members, and one member from the Board of
Game. Board members are appointed by the Governor and
confirmed by the Legislature. The Board's regulated
professions include Assistant Guide, Class
Guide, Master Guide
Guide
Transporter.
Mr. Harris read from a report prepared by the McDowell
Group, Inc: "The Economic Impacts of Guided Hunting in
Alaska" (copy on file):
· Guided hunting in Alaska accounted for a total of
2,210 jobs and $35 million in total labor income in
2012, including all direct, indirect and induced
impacts.
· Guided hunting generated a total of $78 million in
economic activity in Alaska in 2012.
· Guided hunters purchased nearly $2 million in hunting
license and game tags.
Mr. Harris relayed that the board was essential to the
safety of hunters, guides, and transporters, and to the
management of the resource. He was happy to answer any
questions.
Representative Stutes shared that there were people
available for questions.
Co-Chair MacKinnon thanked Representative Stutes and
invited Kris Curtis to the table.
5:13:07 PM
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, reported conducting a sunset review of
the BGCSB to determine whether it was serving the public's
interest and whether it should be extended. Overall, the
auditors concluded that regulating and licensing qualified
guide outfitters and transporters benefited the public
safety and helped to safeguard the state's wildlife
resources. The auditors made a conditional 3-year extension
recommendation. The condition was for the board to
demonstrate the ability to address its deficit during the
legislative sunset review process. At the time the audit
was done the board's debt was over $1 million. If the board
failed to demonstrate the ability to address its deficit,
the auditors recommended it be considered for termination.
Ms. Curtis read the recommendations from the report by the
Division of Legislative Audit (copy on file):
1. Recommendation 1: The Division of Corporations,
Business and Professional Licensing's (DCBPL) director
should ensure staff adhere to procedures designed to
provide efficient and effective support to the board.
Ms. Curtis indicated that it was a repeat finding from the
2011 sunset audit. The auditors found improved support but
some deficiencies remained in the area of public noticing
their exams and their board meetings.
2. Recommendation 2: The Division of Corporations,
Business and Professional Licensing's (DCBPL) director
should take steps to improve timeliness of
investigations.
Ms. Curtis explained that it was another repeat finding
from the 2011 sunset audit where improvements had been
made. However, the division continued to struggle with
timely investigations. Auditors reviewed 25 investigative
cases and found that 17 of them had periods of inactivity
ranging from 4 months to more than 4.5 years. According to
the lead investigator, the cause of the delays was a lack
of resources to address the large case load. The auditors
also found ineffective case monitoring.
3. Recommendation 3: The Division of Corporations,
Business and Professional Licensing's (DCBPL)
director, in combinations with the board, should
increase licensing fees to address the board's
operating deficit.
Ms. Curtis relayed that it was the third time the auditors
had the finding and recommendation. In the prior 2011 audit
it was noted that the board had an operating deficit of
$374 thousand as of June 30, 2011. The board was told that
if licensing fees were not increased or expenditures
decreased the deficit would grow. As of April 2015 the
deficit exceeded $1 million. The deficit increased due to
various factors including delaying an increase in licensing
fees and a reduced number of license renewals. In 2012 the
division changed its allocation methodology for its
indirect costs. The division had made some changes to
correct problems with its cost allocation methodology which
resulted in an addition of more than $200 thousand to its
deficit. In 2012 the division proposed an increase to the
fees ranging from 61 percent to 68 percent. There was a
great deal of pushback during the public process and the
division did not end up increasing fees.
Ms. Curtis continued that in FY 14 there was an increasing
of fees: approximately 44 percent across license types.
However, the increase in revenues was still not enough to
cover operating costs resulting in the deficit continuing
to grow. At the time of the last audit the division had
proposed regulations including increasing licensing fees,
and adding new fees for Federal Medical Assistance
Percentages (FMAP) activity reports. At the time the
auditors believed that the increased fees would be enough
to address the deficit. The auditors took a look and
concluded that with the number of licensees held it was
reasonable to assume the deficit would be addressed. The
auditors made a conditional recommendation that the board
demonstrated that the regulations were final and addressed
the deficit.
4. Recommendation 4: The Division of Corporations,
Business and Professional Licensing's (DCBPL) director
should ensure the transporter license renewal
application form complies with statute.
Ms. Harris explained that there was a statutory requirement
that transporters signed an affidavit when they went to
review their license that all of the activity reports had
been filed with the department. Upon testing compliance
there was no such affidavit. It was a systematic problem
with an easy fix.
5:18:02 PM
Vice-Chair Micciche queried who carried the balance of the
growing $1 million deficit. Ms. Curtis responded that it
was her understanding the deficit was covered with surplus
monies from other boards. Ultimately, the cost of
regulating a board was the responsibility of the board.
Statutes required that fees be established at the necessary
level to cover costs.
Vice-Chair Micciche asked if there was an accounting shift
or a leger to know how much needed to be paid back by BGCSB
to other boards. He also queried about an administrative
cost for the accounting. Ms. Curtis responded that the
auditors had considered recommending to the board the
institution of accounting structures to track revenues and
expenditures. However, the cost of doing so might not
justify the extra work. There was an accounting of each of
the board's balances. The Big Game Commercial Service Board
provided the revenues and expenditures and a table in the
report.
Co-Chair MacKinnon shared that she and Representative
Hawker had been looking into different licensing across all
professions for almost 4 or 6 years. For a period of time,
when the BGCSB had ceased, the State of Alaska was
responsible for collections. From the board's perspective,
administrative costs were mostly associated with violations
or investigations. She concluded that the board was not
upholding the statutes because it was not collecting enough
fees to be self-sustaining. She furthered that the board
was challenged with extenuating circumstances and that
other boards were also operating in the red. However, some
of the other boards had a greater licensure. In her
investigations over the 6 years there were different types
of license holders facing a variety of challenges. The
largest problem was trying to spread the costs over a small
population. She asked Ms. Curtis if she was correct.
Ms. Curtis agreed for the most part. She stated that the
board had 1500 total licensees and thought the board could
potentially climb out of its deficit with increasing fees.
She mentioned a couple of other boards with less than 100
licensees. It was difficult to come out of a deficit with
less licensees.
Co-Chair MacKinnon asked if the BGCSB had a deficit of $1
million. Ms. Curtis replied that at the time of the audit
the amount was over $1 million.
Co-Chair MacKinnon suggested about $670 per applicant to
cover the deficit. She thought it would be difficult to
raise the fees that much in one year.
Senator Hoffman pointed to the differences between FY 14
and FY 15. By the time the legislation expired there would
possibly be an additional $200 thousand in debt. The
current program ended in June 30, 2016. He supposed there
could be an additional $250 thousand in the deficit figure.
He wondered about including benchmarks which would
automatically terminate the board if any target was not
met.
Ms. Curtis responded that the department could provide a
current status of the debt. She had heard the regulations
were passed and the current licensing fees had been
increased. She reported 3 years as an adequate amount of
time because of doing the audit the year prior to the
sunset date. She suggested that less than 3 years would not
provide the board enough time to address the problem.
5:23:02 PM
Senator Hoffman noted that the issue was about the
extension to summer 2019 and time in which the board could
generate additional deficits rather than solving their
self-sufficiency problems. He thought benchmarks would
incentivize addressing the debt. Otherwise, the state might
end up with a $2 million deficit. As the chairman said, it
would be quite impossible to cover all of the deficits in
one year.
Co-Chair MacKinnon thanked Ms. Curtis and noted the senate
would be talking to the department.
Co-Chair MacKinnon OPENED Public Testimony on HB 254.
KELLY VREM, CHAIRMAN, CURRENT BIG GAME COMMUNITY SERVICES,
SUTTON (via teleconference), testified in support of the
legislation. He had been in the guide business since 1973
and had been around when there was a board and when there
was not a board in place. He had attended the bulk of the
BGCSB meetings and concluded that it was better to have a
board. He was happy with the current board, as there was a
wide variety of members. He thought the board had the
ability to make some careful and considerate regulations.
He also pointed out that the board was capable of
controlling its spending. However, he asserted that
investigations were out of control. Investigations were
thrown off course without a board. He had tried to move
investigation procedures in the direction of negotiated
settlements using a point system rather than frequently
issuing fines. He did not understand why the state paid
attorneys and investigators without utilizing their
services to their full extent. The board's purpose and the
vast range of members ensured that no one special interest
superseded the rest. If the board sunsetted it would not
reduce costs but would fall again on the department.
Currently, with new fees and the increased professional
licensing fees he was confident that within 24 months the
board's position would be remarkably different. He
appreciated the possibility of additional time. He thanked
the committee.
Co-Chair MacKinnon wondered if the board was currently
fully staffed. Mr. Vrem responded positively. He noted that
the most recent turnover was a land owner member who termed
out. He was excited about the replacement member. He also
mentioned a game member turning over recently as well. He
was confident the board was functioning on all cylinders.
5:28:43 PM
THOR STACEY, DIRECTOR OF GOVERNMENTAL AFFAIRS, ALASKA
PROFESSIONAL HUNTERS, JUNEAU, spoke in support of the
legislation. He shared that the new fee structures were put
in place in November and the deficit was down to about $800
thousand. He believed the board was on a path to fixing the
deficit. He relayed that the Alaska Professional Hunters
Association (APHA) was the only group that represented
hunting guides in the state. The boards had a tremendous
amount of importance to APHA as an organization that was
conservation based. The group supported stewardship-based
land management structures and high professional standards.
The Big Game Commercial Services Board administered APHA's
professional tests. There was no school, collage, or
vocational program available to become a guide. Rather, a
person became a guide starting as a packer, moving to an
assistant guide, and learning from others. The path to
entry into the historic profession in Alaska was housed
within the program. Without a board guides would have to
take a multiple choice test, drafted by an out-of-state
contractor unfamiliar with Alaska's wildlife, wilderness,
or professional standards. He asserted that having testing
standards and a board were critical to preserving a vibrant
industry that was operating within the greater interest of
the public as a whole. His role was to work between the
industry, the division, and the board helping with
relationships and collaborating on things such as fee
structures. His group was deeply embarrassed by the fact
that the board ran a deficit. He relayed having a firm
commitment to fixing the problem and to supporting
necessary fee structures to pay off the board's deficits.
He appreciated the committee's time and interest in the
board.
Senator Hoffman queried about potential resistance from the
board about increasing fees. He asked for Mr. Stacey's
perspective. Mr. Stacey replied that APHA was reconciled to
the fact that there was no easy fix and that the deficit
would be paid off currently. There was a significant amount
of consternation and frustration around how the account
practices of the board changed. There was $200 thousand in
lost revenues and $300 thousand of deficit at the same
time. During the prior sunset review the board was
presented with three different financial reports in 2011.
He believed that the group had confidence that it was
receiving an accurate accounting of what it owed and was
committed to paying it back. The pushback was no longer a
factor.
5:33:13 PM
Senator Olson referred to Mr. Vrem's statement concerning
having the deficit taken care of within 24 months. He
wondered if Mr. Stacey agreed with the timeline. Mr. Stacey
replied he thought the timeline would be closer to 36
months. He added that with the new fee structures there was
pushback from the transporter industry. There was the
potential that the division would adjust the new fee
structures. He reiterated that the APHA intended to pay the
deficit back.
Senator Olson expressed concern about the deficit
continuing to grow and potentially compromising other
boards' abilities to continue with their investigations. He
relayed his experience sitting on a board where there were
ongoing investigations. He indicated that it would be very
difficult to work under such constraints. Mr. Stacey's
pessimism would not be taken lightly. Mr. Stacey replied
that his pessimism had to do with the timeline and nothing
to do with the ability to pay off the debt.
Vice-Chair Micciche was a huge supporter of the big game
industry. He highlighted the fiscal note showing no
expectation of revenues but emphasized travel. He expressed
his concerns and referred to page 14 of the auditor's
report. He highlighted the fluctuation of revenues and
expenses from year-to-year. He mentioned $500 thousand
deficits every-other-year. He asked Mr. Stacey to explain
the fluctuation biannually. Mr. Stacey shared that there
was a biannual license renewal which accounted for the
spike in income versus expenses every-other-year.
Vice-Chair Micciche wanted to see a formal plan for a way
forward. He suggested there was a lack of business
sophistication regarding a plan to move ahead. The problem
had been ongoing for the previous 4 years or more. He did
not feel the issue was getting better. Mr. Stacey replied
that the board had an interesting role in cost control. He
elaborated that some things were well outside of the
control of the board such as the costs that were charged
back to the licensing program. One of the primary functions
of the board in reducing the deficit was to act as
gatekeeper regarding which investigations went forward and
which ones did not. The main cost driver for the deficit
was investigative costs. There was a new chief
investigator, Angela Burt. She had made a tremendous effort
to reach out to the board. She had been using the board as
wise council regarding which investigations were worth
advancing. The use of the board as the gatekeeper of
investigations would be the absolute number one cost
controller of the board moving forward. He reported that in
2011 the gatekeeping role was not being utilized by the
division or the investigative side. As a result there was
no fee increase and a variety of investigations moved
forward that should not have costing the licensing program
a significant amount of money.
5:38:23 PM
AT EASE
5:38:51 PM
RECONVENED
5:38:57 PM
Vice-Chair Micciche assumed the investigatory costs were
the indirect expenses in the table. Mr. Stacey thought that
they were reflected in indirect expenses and contractual
expenses under direct expenses. He added that the board has
done some things to cut back on costs such as not retaining
legal counsel during its meetings and minimizing travel.
The main cost driver for the deficit were investigative
expenses. The industry was unique with a complex set of
laws and statues that governed the use of the resource and
the protection of the general public. The program was not
cheap to administer. As a whole, the industry was positive
for the state and suggested keeping it in perspective. He
concluded that APHA maintained its commitment to paying off
the deficit whether or not all of the costs could be
controlled.
Co-Chair MacKinnon directed members to send questions to
her office for testifiers. She relayed she had asked Sara
Chambers to hold off on her testimony.
EDDIE GRASSER, SAFARI CLUB INTERNATIONAL, ALASKA CHAPTER,
Palmer, spoke in support of the legislation. He shared that
the main concern of the chapter was that there was a
professional standards board in place to ensure the people
providing service were qualified and professional.
Operating in the wilds of Alaska was a highly risky
business in some cases. There were a number of activities
such as flying and boating that could lead to life-
threatening situations. He disclosed he had been a
professional hunter for 35 years and retired in 1997. As a
hunter he wanted to be assured that the person he was
hiring was qualified. He stressed the need for the board
and supported the legislation.
Senator Bishop remarked that investigations were driving a
large portion of the costs. Mr. Grasser agreed.
Senator Bishop shared some of his personal experience as a
hunter growing up in Alaska. He compared a professional
guide to a big league ball player. Guides needed to be
professional and ethical. He suggested that there needed to
be more discussion amongst the guides about imploring the
standard of the guiding industry in order to drive the
investigations down.
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon invited Ms. Chambers to share her
perspective on what had been shared about an extension for
the BGCSB.
5:44:08 PM
SARA CHAMBERS, ADMINISTRATIVE OPERATIONS MANAGER, DIVISION
OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
shared that there was a fairly sophisticated system within
statute regarding professional licensing fees and how they
were set. She confirmed that they were on a biennial
licensing cycle. There was one 3-month window during a 2-
year period to recuperate revenues that might be in deficit
and to collect any revenues that might be due for the
following 2 years for operating expenses. She added that
for programs in deficit fees needed to be quite high in
order to look back as well as to look forward. It meant
that the fee setting was a fairly strong estimate but could
not take into consideration some of the areas that neither
the division nor the board could control such as complaints
coming in from the outside and investigations. The division
could not control the volume or complexity of the
investigations because the division did not know what they
were when setting fees. It was the division's
responsibility to set fees and to do so in concert and
collaboration with the board. The division and the board
agreed to set fees, increasing them in 2013 and again in
2015. The division was on a trajectory of increasing fees
and had instituted 3 new fees in the current year. As a
result, the burden was placed on the contracting guides and
transporters rather than assistant guides and class "A"
guides who were not contracting at the lower level tier.
Ms. Chambers continued that the program had a high level of
investigations. She made clear that the board was in
control of the investigative process. Investigations moved
forward with a reviewing board member's approval. If a
board member objected to moving an investigation forward it
would not move forward. Over the previous year and a half,
since the new chief investigator was hired, the board and
division had developed a very strong relationship and a
very clear protocol to control the outcome the board needed
per its statutory authority. She noted that the fluctuating
flow of revenues once every 2 years often placed a board
into a deficit position because of cash flow. There were no
general fund appropriations involved, but rather program
expenses. She added that there was no mixing or mingling of
funds since the appropriation of authority was at the
division level and not at the program level. The cash flow
issue was covered by boards in surplus. There was 100
percent accountability in tracking of every dollar that
came in and out of each program. She closed by saying that
the division had very proactively worked to respond to the
audit recommendations. The investigation process had been
improved significantly beginning in 2014. The division and
board were working together to actively increase fees. The
additional findings of the renewal application and public
noticing had already been addressed.
Senator Hoffman queried the possibility of staggering the
fees to spread the revenue more evenly. Ms. Chambers
replied that it could be structured the way he suggested.
However, there was a concern about taking a license away
for non-payment from someone that had already been issued a
license. Urging delinquent license holders to pay on a
volunteer basis in the middle of a 2-year cycle would
likely increase administrative costs. It was something the
division could certainly look into.
5:49:50 PM
Co-Chair MacKinnon suggested only renewing a license for 1
year for some entities until a smoothing of revenues was
reached. She thought that was the point Senator Hoffmann
was suggesting.
Vice-Chair Micciche would not apply the definition of a
cash flow problem to the growing deficits since 2011. He
asked about the fee. Ms. Chambers reported that the
Assistant and Class A guides were paying $410 for a 2 year
period. The registered master guides and transporters were
paying $850 for a 2-year period, an increase over prior
years.
Vice-Chair Micciche provided an example of what it would
take to erase the deficit. He suggested that it would take
an average of $790 for every 2 years as well as another
$333 to pay back the debt service. The price would total
$1123 for 2 years and then revert back to $790 after the
debt was paid off.
Co-Chair MacKinnon set aside HB 254.
HB 254 was HEARD and HELD in committee for further
consideration.
Co-Chair MacKinnon suggested that if Senator Hoffmann or
Senator Micciche had ideas for a reauthorization to get
them to her office by noon the following day. She would
work with the legislative auditor regarding a status
report. She suggested shortening the length of the
extension in order for the legislature to know that the
board was responding to the satisfaction of the finance
committee.